<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[ ] Definitive Proxy Statement RULE 14a-6(e)(2)
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-ll(c) or Rule 14a-12
Stanford Telecommunications, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Names of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(l), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
May __, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stanford Telecommunications, Inc., which will be held Wednesday, June 26, 1996,
at 6:00 p.m. local time, at the Four Points Hotel--Sheraton, 1100 North Mathilda
Avenue, Sunnyvale, California 94089.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
To assure that your shares are represented, please read the Proxy Statement
and promptly mark, date, sign and return the enclosed Proxy in the prepaid
envelope provided.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
Dr. James J. Spilker, Jr.
Chairman of the Board
<PAGE>
STANFORD TELECOMMUNICATIONS, INC.
Notice of Annual Meeting of Stockholders
To Be Held June 26, 1996
The Annual Meeting of the Shareholders of Stanford Telecommunications, Inc.
(the "Company") will be held at the Four Points Hotel--Sheraton, 1100 North
Mathilda Avenue, Sunnyvale, California 94089, on Wednesday, June 26, 1996, at
6:00 p.m. local time, for the following purposes:
1. To elect eight Directors to serve for the ensuing year as set forth in
the attached Proxy Statement.
2. To approve an amendment of the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock, par value $.01 per
share, from 15,000,000 to 25,000,000.
3. To ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the current fiscal year.
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on April 29, 1996 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof. In accordance with
Delaware law, a complete list of stockholders entitled to notice of and to vote
at the meeting will be available at the Company's executive offices, 1221
Crossman Avenue, Sunnyvale, California for ten days prior to the meeting.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY.
By order of the Board of Directors,
GARY S. WOLF
Secretary
Sunnyvale, California
<PAGE>
STANFORD TELECOMMUNICATIONS, INC.
1221 Crossman Avenue
Sunnyvale, California 94089
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Stanford Telecommunications, Inc., a Delaware
corporation (the "Company"), of proxies in the accompanying form to be used at
the Annual Meeting of Stockholders to be held at the Four Points Hotel--
Sheraton, 1100 North Mathilda Avenue, Sunnyvale, California on June 26, 1996 at
6:00 p.m. local time and any adjournment thereof. Proxies may be revoked at any
time before they are voted by filing with the Secretary of the Company a written
notice of revocation, or by duly executing a proxy bearing a later date. A
proxy may also be revoked by any stockholder present at the meeting who
expresses a desire to vote his or her shares of common stock, par value $.01 per
share, of the Company ("Common Stock") in person. Subject to any such
revocation, all shares of Common Stock represented by properly executed proxies
will be voted in accordance with specification on the enclosed proxy. If no
choice is so specified, the shares will be voted FOR the election of the eight
nominees for Director listed in this Proxy Statement, FOR the amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock, and FOR the ratification of Arthur Andersen LLP as the
Company's independent public accountants.
The close of business on April 29, 1996 has been fixed as the record date
for determining the holders of the Common Stock entitled to notice of and to
vote at the meeting. On such date the Company had 6,331,908 shares of Common
Stock outstanding and entitled to vote. Each outstanding share of Common Stock
is entitled to one vote on all matters including the election of Directors whose
names have been placed in nomination. Those eight persons receiving the highest
number of votes will be elected as the Directors of the Company. A majority of
the outstanding shares will constitute a quorum at the meeting. Abstentions and
broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions will be
counted in tabulations of the votes cast on any proposal presented to
stockholders and, as a result, will have the same effect as negative votes.
Broker non-votes will have the same effect as negative votes with respect to the
proposal to amend the Company's Certificate of Incorporation, but will not be
counted for purposes of determining whether any other proposal that may be
presented to the stockholders has been approved.
A copy of the Company's 1996 Annual Report to Stockholders containing
financial statements for the fiscal year ended March 31, 1996 accompanies this
Proxy Statement. This Proxy Statement and the accompanying form of proxy are
first being sent to stockholders on or about May 28, 1996.
The expense of printing and mailing proxy material will be borne by the
Company. The Company will reimburse brokers and nominees for their reasonable
out-of-pocket expenses in forwarding soliciting material to beneficial owners of
shares held of record by such brokers and nominees. In addition to the
solicitation of proxies by mail, solicitation may be made by certain Directors,
officers and other employees of the Company by personal interview, telephone or
telegraph; no additional compensation will be paid for such solicitation.
-1-
<PAGE>
ELECTION OF DIRECTORS
Eight directors are to be elected to serve until the next Annual Meeting of
Stockholders and until their respective successors are duly elected. Each of
the nominees named below is presently a Director of the Company. In the event
that any nominee becomes unable or declines to serve for any reason, proxies may
be voted for the election of the balance of those nominees named and for such
other person or persons as the proxy holders or the present Board of Directors
(the "Board") may select, or the size of the Board may be reduced in accordance
with the By-laws of the Company. The Board has no reason to believe that any of
the nominees named will be unable or unwilling to serve.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
Set forth below are the names and ages of the nominees and Directors, their
principal occupations at present and for the past five years, certain
directorships held by certain of the nominees and the year in which each became
a Director of the Company.
Name and Principal Occupation at Present Director
and for the Past Five Years; Directorships Since Age
------------------------------------------ ----- ---
James J. Spilker, Jr.. . . . . . . . . . . . . . . . . 1973 62
Dr. Spilker, a founder of the
Company, is Chairman of the Board.
He served as President and Chief
Executive Officer of the Company from
August 1981 to June 1995.
Val P. Peline. . . . . . . . . . . . . . . . . . . . . 1985 65
Dr. Peline was elected as a Director
of the Company in October 1985.
Dr. Peline joined the Company as its
President and Chief Executive Officer
effective June 5, 1995. Dr. Peline
served as President of the Electronic
Systems Group, a division of Lockheed
Corp., from 1987 until he retired
from such position in March 1995.
Dr. Peline had been President of the
Lockheed Space Division from 1984 to
March 1987.
Michael Berberian. . . . . . . . . . . . . . . . . . . 1989 62
Mr. Berberian, a private investor,
was appointed to fill a vacancy on
the Board of Directors in December
1989. From 1973 to 1990, he served
on the Board of Directors of Lockheed
Corp.
Leonard Schuchman. . . . . . . . . . . . . . . . . . . 1985 59
Mr. Schuchman was elected as a
Director of the Company in April
1985. Mr. Schuchman joined the
Company in January 1976 and became
Vice President in February 1977. He
is responsible for directing the
Company's Communications and
Navigation Systems Operation.
-2-
<PAGE>
John W. Brownie. . . . . . . . . . . . . . . . . . . . 1973 62
Mr. Brownie, a founder of the
Company, served as Executive Vice
President of the Company from June
1982 and as General Manager from July
1981 until his retirement in January
1985. He has been a Director and
Vice President of the Company since
the Company's organization in May
1973.
P. Marshall Fitzgerald . . . . . . . . . . . . . . . . 1973 63
Dr. Fitzgerald, a founder of the
Company, has served as a Director
since its organization in May 1973
and served as President of the
Company from May 1973 until his
retirement in July 1981.
Milton W. Holcombe . . . . . . . . . . . . . . . . . . 1990 63
Mr. Holcombe was appointed to fill a
vacancy on the Board of Directors in
September 1990. Mr. Holcombe served
as President of Chrysler Technologies
Airborne Systems, Inc. from 1988
until his retirement in 1990. In
1970, he co-founded Electrospace
Systems, Inc. where he served as
Group Vice President and Assistant
Treasurer prior to the acquisition of
Electrospace Systems by Chrysler
Corporation in 1988.
C. Jerome Waylan . . . . . . . . . . . . . . . . . . . 1994 54
Dr. Waylan was appointed to fill a
vacancy on the Board of Directors in
May 1994. Dr. Waylan served as
President of GTE Spacenet Corporation
from 1985 to 1993 and as Executive
Vice President of GTE Mobilnet from
1993 until his retirement in April
1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
NAMED.
-3-
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board held five meetings during fiscal year 1996. Each
Director attended 75% or more of the aggregate number of meetings of the Board
and of the committees of the Board on which he serves.
The Board has appointed a Compensation Committee, an Audit Committee and a
Stock Plans Committee. There is no nominating committee.
The Compensation Committee held one meeting in fiscal year 1996. Its
function is to determine or review and pass upon management's recommendations
with respect to executive compensation and incentive bonuses. The members of
the Compensation Committee through June 1995 were Dr. Fitzgerald and
Messrs. Brownie, Berberian and Holcombe, and from July 1995 to March 1996 were
Drs. Fitzgerald and Waylan and Messrs. Brownie and Holcombe.
The Audit Committee held two meetings in fiscal year 1996. Its functions
are to monitor the effectiveness of the audit effort, to supervise the Company's
financial and accounting organization and financial reporting and to select a
firm of independent public accountants, whose duty it is to audit the books and
accounts of the Company. The members of the Audit Committee through June 1995
were Dr. Peline and Messrs. Brownie, Berberian and Holcombe and from July 1995
to March 1996 were Messrs. Brownie, Berberian and Holcombe.
The Stock Plan Committee took all necessary actions by unanimous written
consent and by one meeting in fiscal year 1996. Its functions are to supervise
and manage the Company's Employee Stock Purchase Plan, the 1982 Stock Option
Plan and the 1991 Stock Option Plan. The members of the Stock Plans Committee
during fiscal year 1996 were Dr. Fitzgerald and Messrs. Brownie and Berberian.
DIRECTORS' FEES
Each non-employee Director of the Company receives an annual fee of
$15,000. Non-employee directors are also entitled to reimbursement for
reasonable travel costs associated with his attendance at meetings of the Board
or committees of the Board on which he serves.
-4-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid for the fiscal years ended March 31, 1994, 1995 and 1996 to
each person who served as the Company's Chief Executive Officer during fiscal
year 1996 and to each of the other four most highly compensated executive
officers (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------- -------------
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary Bonus (1) Options (#) Compensation (2)
- ------------------------ ------ -------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Val P. Peline (3) 1996 $235,400 $0 110,000 $2,944
Chief Executive Officer 1995 n/a n/a n/a n/a
and President 1994 n/a n/a n/a n/a
James J. Spilker, Jr. 1996 $240,011 $0 3,950 $4,500
Chairman 1995 $234,452 $35,000 4,300 $7,208
1994 $215,010 $0 4,300 $7,706
Leonard Schuchman 1996 $183,019 $0 3,012 $6,770
Vice President and 1995 $181,479 $30,000 28,500 $6,222
Director 1994 $172,822 $17,000 3,220 $5,712
John E. Ohlson 1996 $168,002 $0 2,765 $5,754
Vice President and Chief 1995 $168,002 $0 3,360 $5,776
Technical Officer 1994 $166,926 $10,000 3,220 $5,099
Gary S. Wolf 1996 $161,013 $0 2,650 $4,750
Vice President, Chief 1995 $159,440 $20,000 18,080 $4,936
Financial Officer, 1994 $151,850 $ 5,000 2,800 $4,757
Secretary and Treasurer
Ernest L. Dickens, Jr. 1996 $149,372 $11,530 2,229 $4,679
Vice President 1995 $138,826 $8,790 2,708 $4,554
1994 $135,343 $0 2,629 $5,029
</TABLE>
- --------
(1) Represents incentive bonuses paid during the fiscal year for prior year's
performance pursuant to the Company's Officer Incentive Compensation Plan
for J.J. Spilker, Jr., L. Schuchman, J.E Ohlson and G.S. Wolf, and pursuant
to the Company's Group Vice President Incentive Bonus Program for E.L.
Dickens, Jr. Mr. Dickens became a Vice President of the Company in fiscal
year 1996.
(2) For fiscal year 1996, includes (i) the Company's contribution to the
Pension and Profit Sharing portions of the Stanford Telecommunications,
Inc. Employee Retirement Program of $4,500 for each of J.J. Spilker, Jr.,
L. Schuchman, J.E Ohlson and G.S. Wolf, and $4,165 for E.L. Dickens; (ii)
Company-paid life insurance premiums as follows: Peline, $2,944;
L. Schuchman, $520; J.E. Ohlson, $504; G.S. Wolf, $250, E.L. Dickens, Jr.,
$514; (iii) an employment longevity award of $1,000 for L. Schuchman and
(iv) patent issue awards of $750 each for L. Schuchman and J.E. Ohlson.
(3) Dr. Peline joined the Company as its Chief Executive Officer and President
on June 5, 1995. Compensation reported herein does not include $15,000
paid to Dr. Peline as a non-employee director during each of fiscal years
1995 and 1994.
-5-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options granted in fiscal year
1996 to the Named Executive Officers.
<TABLE>
<CAPTION>
Percent of
Total Potential Realizable Value at
Number of Options Assumed Annual Rates of Stock
Securities Granted to Price Appreciation for Option
Underlying Employees Exercise Term (2)
Options in Fiscal Price Per Expiration --------------------------------
Name Granted (1) Year Share Date 5% 10%
- --------------------- ------------- ---------- ----------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Val P. Peline 100,000 54.7% $14.500 4/3/05 $911,897 $2,310,927
10,000 5.5 18.125 10/5/05 113,987 288,866
James J. Spilker, Jr. 3,950 2.2 14.750 6/30/00 16,097 35,570
Leonard Schuchman 3,012 1.6 14.750 6/30/00 12,274 27,123
John E. Ohlson 2,765 1.5 14.750 6/30/00 11,268 24,899
Gary S. Wolf 2,650 1.5 14.750 6/30/00 10,799 23,863
Ernest L. Dickens 2,229 1.2 14.750 6/30/00 9,084 20,072
</TABLE>
(1) All options granted in fiscal year 1996 were granted pursuant to the
1991 Stock Option Plan (the "Option Plan"). The Option Plan provides
for granting either incentive or non-qualified stock options. All
options granted in fiscal year 1996 were non-qualified stock options
granted at 100% of the fair market value of the Common Stock on the
date of grant. The options for Dr. Spilker and Ohlson and
Messrs. Schuchman, Wolf and Dickens expire five years from date of
grant, unless earlier terminated in certain events related to
termination of employment. The options vest 25% per year on each of
the first four anniversaries of the option grant date, but vesting
ceases when the optionee terminates employment. Each of the options
granted to Dr. Peline expire ten years from date of grant and vest
100% on the one year anniversary of its grant date. All options
granted under the Option Plan which have been held for at least one
year will vest in full in the event of the sale, dissolution or
liquidation of the Company, a merger or consolidation in which the
Company is not the surviving corporation or becomes the subsidiary of
another entity, or an offer to all stockholders of the Company to
purchase more than 50% of the Company's outstanding shares.
(2) The 5% and the 10% assumed rates of appreciation applied to the option
exercise price over the option term are prescribed by the rules of the
SEC and do not represent the Company's estimate or projection of the
future price of its Common Stock. If the Common Stock does not
appreciate above the exercise price, the Named Executive Officers will
receive no benefit from the options.
-6-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table shows the number of shares of Common Stock represented
by outstanding stock options held by each of the Named Executive Officers as of
March 31, 1996. On March 31, 1996, the closing price of the Common Stock on the
Nasdaq National Market was $30.00 per share.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- -------------------- --------------- ---------- --------------------- --------------------
<S> <C> <C> <C> <C>
Val P. Peline 0 Shares $ 0 0/110,000 $0/$1,668,750
Common Stock Common Stock
James J. Spilker, Jr. 0 shares 0 3,225/9,325 $59,931/$150,806
Common Stock Common Stock
Leonard Schuchman 0 shares 0 28,735/25,997 $495,639/$383,934
Common Stock Common Stock
John E. Ohlson 0 shares 0 2,450/6,895 $45,378/$111,484
Common Stock Common Stock
Gary S. Wolf 0 shares 0 5,920/17,610 $103,304/$292,224
Common Stock Common Stock
Ernest L. Dickens 1,992 shares $12,779 0/5,574 $0/$90,200
Common Stock Common Stock
</TABLE>
COMPENSATION AND STOCK PLANS COMMITTEES
REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing and recommending to the Board policies on compensation of the
Company's senior executives. The Stock Plans Committee of the Board of
Directors administers the Company's stock option plan and recommends to the
Board policies on stock options and other equity-based incentives. Set forth
below, in accordance with the rules of the Securities and Exchange Commission
("SEC"), is a joint report of the Compensation and Stock Plans Committees
concerning those policies and how they were applied to the fiscal year 1996
compensation to Dr. Val P. Peline, President and Chief Executive Officer, and to
all other executive officers of the Company.
GENERAL EXECUTIVE COMPENSATION POLICIES
The Company's compensation program is designed to attract and retain
qualified executives and to ensure that their efforts are directed toward the
long-term interests of the Company and its stockholders. To that end, the
Company strives to pay competitive base salaries and to provide incentives to
its executives by linking individual compensation to Company and business unit
performance through an annual incentive bonus plan and linking executive and
stockholder interests through a stock option plan.
-7-
<PAGE>
Each of the Compensation and Stock Plans Committees annually review
salaries, incentive compensation and stock options, and other aspects of
executive compensation. In general, the purpose of such reviews is to ensure
that the Company's overall executive compensation program remains competitive
with other companies that are similar in revenues, profitability, asset size and
markets served and that executive pay reflects both the individual's performance
and the overall performance of the Company. Salary survey information from
Western Management Group and Radford Associates for companies designated as
"high technology companies," many of which are included in the S&P High
Technology Index (the "Comparable Companies"), as well as other publicly
available sources are used in the evaluation to determine the competitiveness of
the executive compensation program. The Compensation Committee attempts to
establish base salaries for the Company's executive officers in the median range
of the Comparable Companies and to target incentive compensation in the low
range of the Comparable Companies, reflecting the Compensation Committee's aim
to be competitive in the market for executive talent, without lowering its
performance expectations.
In determining fiscal year 1996 compensation for the executive officers,
the Compensation Committee reviewed the Company's financial results for fiscal
year 1995, together with a comparison against plan and results achieved during
prior fiscal years. The Compensation Committee evaluates company performance
based primarily on profitability, with consideration also given to revenue
growth. For fiscal year 1995, revenues increased approximately 17% from fiscal
year 1994, but net income decreased substantially as a result of non-recoverable
cost overruns on certain fixed-price development contracts and a charge
associated with an unfavorable decision in an arbitration hearing.
SUMMARY OF FISCAL YEAR 1996 COMPENSATION PROGRAMS
For fiscal year 1996, the executive compensation program consisted of base
salary and eligibility for participation in the Corporate Officer Incentive
Compensation Plan and the Officer's Option Incentive Program.
BASE SALARY
The Compensation Committee determines the base salaries of the Company's
executive officers based on the Company's revenues and profitability for the
prior year, its assessment of individual performance, and the comparability
considerations described above. The average base salary increase for executive
officers during fiscal year 1995 was 5.6%. Base salaries for executive officers
were not increased for fiscal year 1996, principally because of the decrease in
net income in 1995.
CORPORATE OFFICER INCENTIVE COMPENSATION PLAN
The Corporate Officer Incentive Compensation Plan is an annual incentive
bonus plan that links the participant's incentive bonus award to the Company's
profitability as measured by net income achieved as a percent of revenues for
the most recently completed fiscal year. An incentive pool is established by a
formula based on net income as a percentage of revenues and net income dollars
achieved for the most recent fiscal year. Awards are made on the basis of each
participant's individual contribution, as determined by the Compensation
Committee, to the achievement of profitable operations. The Compensation
Committee may distribute none or any portion of the pool to the executive
officers. During fiscal year 1996, the Compensation Committee distributed none
of the available pool.
On June 28, 1995, the Board of Directors adopted the Management Incentive
Plan to replace the Corporate Officer Incentive Compensation Plan. Under the
Management Incentive Plan, executive officers as well as other key management
and technical personnel may receive incentive compensation based upon
-8-
<PAGE>
the Company and participants achieving mutually agreed upon measurable
objectives. The Management Incentive Plan provides that, each year, the Board
will establish the Company objectives, and the Company objectives will become
the objectives of the President and the Chairman of the Board. The President
then will establish individual objectives for the executive officers who report
directly to him, and each of such executive officers then will establish
objectives for those persons who participate in the Management Incentive Plan
and report to him. The President will review and approve the objectives for all
participants to assure that the individual objectives collectively will serve
the Company in achieving the objectives set by the Board. At the end of each
fiscal year, each participant will become eligible for an award under the
Management Incentive Plan based on the Company achieving the objectives set
forth by the Board and the participant's performance and accomplishment toward
the objectives set forth for such participant. Awards to executive officers
will be determined by the Compensation Committee after the Company evaluation
and bonus pool are established by the Board. The Board will establish the bonus
pool by a formula based on the performance of the Company and of each of the
participants. No amounts were paid during fiscal year 1996 under the Management
Incentive Plan; however, it is anticipated that payments will be made during
fiscal 1997 based upon objectives and results achieved during fiscal year 1996.
STOCK OPTIONS
The Compensation and Stock Plans Committees view stock options as a means
of linking executive and stockholder interests. Each year, the Stock Plans
Committee consider and may approve stock option grants, determining such aspects
as grant size, vesting schedules and plan participants.
In May 1993, the Board of Directors adopted an Officers' Option Incentive
Program to establish a uniform policy governing annual option grants to eligible
officers. During fiscal year 1996, the Board of Directors revised the Officer's
Option Incentive Program to expand the number of management personnel eligible
for option grants under the program and renamed the program the Management
Option Incentive Program, to be effective beginning in fiscal year 1997. Under
the Management Option Incentive Program, management personnel who participate in
the Company's Management Incentive Plan will be considered for a stock option
grant under the revised program. The number of options already held by the
eligible participants is not a factor in determining whether an otherwise
eligible officer will receive an option grant. It is anticipated that annual
option grants will be made to certain officers of the Company, including the
Named Executive Officers; however, the Compensation and Stock Plans Committees
may exclude certain officers from receiving options as they deem appropriate.
Options proposed under this program are subject to the Stock Plans Committee's
discretion under the provisions of the Company's 1991 Stock Option Plan. During
fiscal year 1996, a total of 38,721 options were granted pursuant to the
Officer's Option Incentive Program, of which the Named Executive Officers
received an aggregate of 12,377 options. See "Executive Compensation -- Option
Grants in Last Fiscal Year." The number of shares of Common Stock underlying
each option granted was based primarily on a formula tied to the optionee's base
salary.
DR. PELINE'S FISCAL YEAR 1996 COMPENSATION
In January 1995, the Board established an executive search committee
consisting of Messrs. Brownie and Berberian and Dr. Fitzgerald (the "Search
Committee") for the purpose of finding a candidate qualified to serve the
Company as its President and Chief Executive Officer and establishing a
compensation package competitive with chief executives of other companies
similar to the Company in revenues, profitability, asset size and markets
served. Once the Search Committee determined that Dr. Peline was well qualified
for the position and would consider an offer, it secured the professional
services of Radford Associates, a compensation consulting company, and conferred
with the Company's outside legal counsel to present a reasonable compensation
package to Dr. Peline. Dr. Peline joined the Company as its President and Chief
Executive Officer on June 5, 1996 and received a compensation package
-9-
<PAGE>
consisting of an annual base salary of $300,000, an option to purchase 100,000
shares of Common Stock, and the opportunity to earn additional options if the
market price of the Common Stock reached predetermined levels over a specified
period of time. Dr. Peline is also eligible for all other benefits available to
senior executive officers of the Company.
POLICY WITH RESPECT TO DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code, as amended, generally
disallows tax deductions by a company for compensation paid to certain of such
company's executive officers in excess of $1,000,000 per person during the
fiscal year. Final regulations under Section 162(m) (the "Final Rules") were
issued by the Internal Revenue Service in December 1995 and include an exemption
from the deduction limitation for compensation that is "performance-based"
within the meaning of Section 162(m) and the Final Rules.
The Compensation and Stock Plans Committees intend to include performance-
based compensation in the executive compensation program to the extent
reasonably necessary in order to minimize the effects of Section 162(m). For
example, at the 1995 Annual Meeting, the Committee submitted to the vote of the
stockholders certain amendments to the Company's 1991 Stock Option Plan that,
among other things, limit the number of options that can be granted to an
individual over the life of the Option Plan in order to maximize the
deductibility of option grants under the Option Plan. However, in light of the
Company's intent to remain competitive in its compensation of executives and
other employees, the Company reserves the right to pay compensation that may not
be tax deductible.
COMPENSATION COMMITTEE
Milton Holcombe, Chairman
John Brownie
P. Marshall Fitzgerald
C. Jerome Waylan
STOCK PLANS COMMITTEE
Michael Berberian, Chairman
John Brownie
P. Marshall Fitzgerald
-10-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The SEC requires disclosure where an executive officer of a company served
or serves as a director or on the compensation committee of another entity and
an executive officer of such other entity served or serves as a director or on
the compensation committee of the Company. The Company does not have any such
interlocks. Decisions as to executive compensation are made by the Compensation
Committee and the Stock Plans Committee. During fiscal year 1996, the
Compensation and Stock Plans Committees were comprised entirely of non-employee
Directors. Dr. Fitzgerald and Mr. Brownie, who serve as members of both such
committees, were former officers of the Company. Dr. Fitzgerald retired from
the Company in 1981 and Mr. Brownie retired in 1985.
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P 500 Composite Index and the S&P High
Technology Composite Index for a period of five fiscal years ended March 31,
1996. "Total return," for the purpose of this graph, assumes reinvestment of
all dividends.
Comparison of Cumulative Total Return
Stanford Telecommunications, Inc. Common Stock
S & P 500 Composite Index and S & P High Technology Composite Index
[Graph]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stanford Telecom 100.00 70.59 108.82 189.71 182.35 352.94
- ---------------------------------------------------------------------
S & P 500 100.00 111.04 127.95 129.84 150.05 198.22
- ---------------------------------------------------------------------
S & P High Technology 100.00 102.33 112.44 132.25 167.36 225.95
- ---------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
STOCK OWNERSHIP
The following table sets forth, as of March 31, 1996, the names and
addresses of all persons who beneficially owned, to the knowledge of the
Company, more than 5% of the outstanding shares of Common Stock, and the number
of shares beneficially owned by each Director and nominee, each Named Executive
Officer and all Directors and executive officers as a group. Except as
otherwise indicated and subject to community property laws where applicable,
each person has sole investment and voting power with respect to the shares
shown. Ownership information is based upon information furnished by the
respective persons.
<TABLE>
<CAPTION>
Beneficial Ownership of
Common Stock
---------------------------
Number of Percent
Shares of Class
------------- -----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
James J. Spilker, Jr. (1) . . . . . . . . . . . 664,332 10.5%
1221 Crossman Avenue
Sunnyvale, California 94089
Michael Berberian . . . . . . . . . . . . . . . 555,475 8.8%
5200 North Palm, Suite 203
Fresno, California 93704
Leonard Schuchman (2) . . . . . . . . . . . . . . 170,040 2.7%
John W. Brownie (3) . . . . . . . . . . . . . . . 24,975 *
P. Marshall Fitzgerald . . . . . . . . . . . . . 5,552 *
Val P. Peline (4) . . . . . . . . . . . . . . . . 1,490 *
Milton W. Holcombe . . . . . . . . . . . . . . . 500 *
C. Jerome Waylan (5) . . . . . . . . . . . . . . 200 *
Ernest L. Dickens (6) . . . . . . . . . . . . . . 1,334 *
John E. Ohlson (7) . . . . . . . . . . . . . . . 82,219 1.3%
Gary S. Wolf (8) . . . . . . . . . . . . . . . . 37,639 *
All Directors and executive officers as a group
(12 persons) (9) . . . . . . . . . . . . . . . . 1,546,150 24.2%
5% STOCKHOLDER:
Kopp Investment Advisors, Inc. (10) . . . . . . . 2,170,031 34.3%
6600 France Avenue South, Suite 672
Edina, Minnesota 55435
</TABLE>
FOOTNOTES APPEAR ON THE FOLLOWING PAGE.
-12-
<PAGE>
- ----------
(1) Includes 5,375 shares subject to options exercisable within 60 days after
March 31, 1996 and 10,000 shares held by Dr. Spilker's wife.
(2) Includes 36,665 shares subject to options exercisable within 60 days after
March 31, 1996.
(3) Consists of shares held in trust for John W. and Alice Brownie.
(4) Includes 240 shares held by Dr. Peline's wife.
(5) Consists of shares held by Dr. Waylan and his wife in Joint Tenancy.
(6) Consists of shares subject to options exercisable within 60 days after
March 31, 1996.
(7) Includes 4,095 shares subject to options exercisable within 60 days after
March 31, 1996.
(8) Includes 7,390 shares subject to options exercisable within 60 days after
March 31, 1996 and 1,500 shares held by Mr. Wolf's minor daughter.
(9) Includes an aggregate of 56,603 shares subject to options exercisable
within 60 days after March 31, 1996.
(10) As disclosed in Amendment No. 5 to Schedule 13G (the "Schedule 13G") filed
with the SEC by Kopp Investment Advisors, Inc., a Minnesota corporation and
a registered investment adviser ("KIA"), on behalf of itself and certain
related persons, LeRoy C. Kopp, an individual ("Kopp"), controls each of
KIA, Caring and Sharing Foundation (the "Foundation") and the LeRoy C. Kopp
Individual Retirement Account (the "IRA") and is trustee of the KIA Profit
Sharing Plan (the "PSP" and, together with KIA, Kopp, the Foundation and
the IRA, the "reporting persons"). All of the reporting persons have the
same address as KIA. Kopp has sole voting and dispositive power as to
67,000 shares. In addition, Kopp has shared dispositive power as to
2,036,031 shares, of which he also has shared voting power as to 20,000
shares with the Foundation. The IRA has sole voting and dispositive power
as to 63,000 shares, and the PSP has sole voting and dispositive power as
to 4,000 shares. Of these shares, 2,040,031 are held by the respective
reporting persons in a fiduciary or representative capacity, and the
reporting persons disclaim beneficial ownership of such shares.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers and holders of more than 10% of
the outstanding Common Stock ("insiders") to file with the SEC reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company. Insiders also are required to furnish the Company with a copy
of all reports that they file with the SEC pursuant to Section 16(a).
Based solely on its review of such reports or written representations with
respect to Section 16(a) reports by insiders, the Company believes that during
fiscal year 1996, each of the insiders complied with all applicable filing
requirements under Section 16(a).
-13-
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 15,000,000 TO 25,000,000
The Board of Directors has unanimously approved an amendment of Article 4
of the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 15,000,000 to 25,000,000. The Board of
Directors recommends that the Company's stockholders approve this amendment.
Approval of the amendment will give the Company the power to cause a Certificate
of Amendment with respect to the increase in the number of authorized shares of
Common Stock ("Certificate of Amendment") to be filed with the Delaware
Secretary of State on or prior to June 30, 1997 without further action by the
stockholders; provided, however, that the Company shall not be obligated to file
a Certificate of Amendment at any specified time or at all.
The Board of Directors believes it is in the Company's best interests to
increase the number of authorized shares of Common Stock in order to have
additional authorized shares available for issuance to meet business needs as
they arise. The Board of Directors believes that the availability of such
additional shares will help the Company to attract and retain talented employees
through the grant of stock options and other stock-based incentives. The
availability of such shares will also provide the Company with the flexibility
to issue Common Stock for other proper corporate purposes which may be
identified by the Board of Directors in the future, such as stock dividends,
financings or acquisitions. No such transaction is currently contemplated by
the Company.
The additional authorized shares could also be used pursuant to the
Company's stockholder rights plan (the "Rights Plan"), which was adopted by the
Board of Directors on May 9, 1995. Pursuant to the Rights Plan, one right is
attached to each share of Common Stock. If a stockholder or a group of
stockholders acting together (the "acquiror") were to become the beneficial
owner of 15% or more of the Company's Common Stock, each right (except for
rights held by the acquiror) would entitle its holder to purchase one additional
share of Common Stock from the Company at an exercise price equal to one-half of
the then current stock price. The dilutive effect to the acquiror of such
purchases of Common Stock pursuant to the Rights Plan would tend to discourage a
change in control of the Company. If there are insufficient shares of Common
Stock available for issuance pursuant to the exercise of all of the rights, the
Rights Plan permits the Company to deliver to the exercising rights holders
consideration other than shares of Common Stock or to take other measures to
deliver value to the rights holders, including a reduction in the exercise price
of the rights, the delivery of debt or other equity securities, or the delivery
of cash or other assets. Accordingly, the increase in the number of authorized
shares of Common Stock being recommended to the Company's stockholders is not
necessary in order to implement the Rights Plan. However, the availability of
additional shares of Common Stock would give the Company greater flexibility in
implementing the Rights Plan in the event that it is triggered.
At the 1995 Annual Meeting, the Company's stockholders approved an increase
in the number of authorized shares of Common Stock of the Company from
10,000,000 to 15,000,000. At that time, of the 10,000,000 authorized shares of
Common Stock, there were approximately 3,119,526 shares unissued and unreserved
for issuance. Also at the 1995 Annual Meeting, the Company's stockholders
approved an increase in the number of shares of Common Stock available for
issuance pursuant to stock options granted under the Company's 1991 Stock Option
Plan, as amended, from 500,000 to 1,000,000. As of April 29, 1996,
approximately 7,598,868 of the 15,000,000 authorized shares of Common Stock were
unissued and unreserved for issuance.
-14-
<PAGE>
If the proposed amendment to the Certificate of Incorporation is approved,
the authorized shares of Common Stock in excess of those issued and reserved
will be available for issuance at such times and for such corporate purposes as
the Board of Directors may deem advisable without further action by the
Company's stockholders, except as may be required by applicable laws or the
rules of any stock exchange or national securities association trading system on
which the Company's securities may be listed or traded. The Board of Directors
does not intend to issue any Common Stock except on terms that the Board deems
to be in the best interests of the Company and its then existing stockholders.
Management has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock
proposed to be authorized. Because holders of Common Stock do not have
preemptive rights, any future issuances of Common Stock could have a dilutive
effect.
The full text of Article 4, as such is proposed to be amended, is as
follows:
The Corporation is authorized to issue only one class of shares of
stock to be designated "Common Stock" and the total number of shares of
stock which the Corporation shall have the authority to issue is twenty
five million (25,000,000) shares of Common stock, par value one cent ($.01)
per share.
The affirmative vote of the holders of a majority of the Company's
outstanding Common Stock is required to approve this proposal. If approved by
the stockholders, the proposed amendment to the Certificate of Incorporation
will become effective upon the filing of a Certificate of Amendment with the
Delaware Secretary of State.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND ARTICLE
4 OF THE COMPANY'S CERTIFICATE OF INCORPORATION.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Arthur Andersen LLP to serve as the Company's
independent public accountants for fiscal year 1996. While it is not required
to do so, the Board is submitting to the stockholders the selection of that firm
for ratification in order to ascertain the stockholders' views. If such
selection is not ratified by the affirmative vote of a majority of the shares of
Common Stock present or represented at the meeting and entitled to vote, the
Board will reconsider its selection.
Representatives of Arthur Andersen LLP are expected to be present at the
meeting and available to respond to appropriate questions. Such representatives
will have the opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP.
STOCKHOLDER PROPOSALS
To be considered for presentation at the 1997 Annual Meeting of
Stockholders, a stockholder proposal must be received at the offices of the
Company not later than January 29, 1997.
-15-
<PAGE>
OTHER MATTERS
Management knows of no other business which will be presented for
consideration at the meeting. If any other business is properly brought before
the meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the persons voting the
proxies.
Whether or not you intend to be present at this meeting, you are urged to
return your proxy promptly.
By order of the Board of Directors
GARY S. WOLF
Secretary
-16-
<PAGE>
STANFORD TELECOMMUNICATIONS, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS JUNE 26, 1996
James J. Spilker, Jr. and Gary Wolf, or either of them each with the power
of substitution , are hereby authorized to represent and vote as designated on
the reverse side the shares of the undersigned at the Annual Meeting of
Stockholders of Stanford Telecommunications, Inc. to be held on Wednesday,
June 26, 1996, or at any adjournment of the Annual Meeting.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE VOTE AT THE ANNUAL
MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote such shares, and acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement relating to the June 26, 1996 Annual Meeting of Stockholders.
Shares represented by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the proxies will have the
authority to vote "FOR" the election of directors and "FOR" Items 2 and 3.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ACCOMPANYING
ENVELOPE.
Reverse of Proxy:
/X/ Please mark
votes as in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" ITEMS 2 AND 3.
1. Election of Directors.
NOMINEES: Michael Berberian, John W. Brownie, P. Marshall Fitzgerald, Milton W.
Holcombe, Val P. Peline, Leonard Schuchman, James J. Spilker, Jr., C. Jerome
Waylan
/ / FOR / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ / MARK HERE / /
FOR ADDRESS
------------------------------------- CHANGE AND
For all nominees except as noted above NOTE BELOW
2. Amendment of the Company's Certificate FOR AGAINST ABSTAIN
of Incorporation to increase the number / / / / / /
of authorized shares of Common Stock from
15,000,000 to 25,000,000.
3. Ratification of the appointment of FOR AGAINST ABSTAIN
of Arthur Andersen LLP as the Company's / / / / / /
independent auditors for the current
fiscal year.
4. Upon any other matters which might properly come before the meeting.
Please sign exactly as your
name appears on this proxy. If Signature: Date
signing for estates, trusts or --------------- ----------
corporations, title and Signature: Date
capacity should be stated. If --------------- ----------
shares are held jointly, each
holder should sign.
